Two recent decisions highlight the importance of complying with redundancy consultation requirements

An employer will have a defence to an unfair dismissal claim made by an employee dismissed because of a genuine redundancy.

A genuine redundancy arises where:

  • the employee’s job is no longer required for operational reasons;
  • there are no reasonable opportunities to redeploy the employee within the employer’s organisation (or that of any associated entities); and
  • the employer has complied with any consultation obligations contained in an applicable modern award or enterprise agreement.

The first two requirements are relatively straightforward, but the third can be problematic.   An employee covered by a modern award or enterprise agreement ordinarily has a right to be consulted as soon as practicable after an employee makes a definite decision to make the employee’s position redundant.  However, some enterprise agreements may require earlier consultation.

Failing to comply with these consultation requirements can render a redundancy unfair, requiring the employer to pay additional compensation to the employee as well costing the employer time and money to defend or settle an unfair dismissal claim. It can also constitute a breach of the applicable modern award or enterprise agreement, which can give rise to penalties of up to $51,000 against a corporate employer.

The following decisions provide guidance about how the consultation obligations will be applied.

Ingersole v Castle Hill Country Club Limited [2014] FCCA 450

In this decision, the Federal Circuit Court of Australia was required as part of a general protections claim to examine whether Castle Hill Country Club (CHCC) failed to consult with Ms Ingersole when her position was made redundant.

The CHCC Board resolved to make Ms Ingersole’s position redundant on 29 February 2012, and she was informed the next day.

The Court held that the relevant award required CHCC to consult Ms Ingersole only after a definite decision had been made that affected Ms Ingersole’s employment. As the Board’s “definite decision” was the decision to terminate Ms Ingersole’s employment as a result of that redundancy, then consultation was not required prior to that time. 

The Court accepted that CHCC complied with its obligations under the modern award by informing Ms Ingersole about the Board’s decision the day after it was made, and it was not required to commence the consultation process when the redundancy remained only a possibility. 

The Court was also satisfied that the consultation itself was adequate.  CHCC management met with Ms Ingersole and discussed the effects of the redundancy, and any potential measures available to avert or mitigate those effects.  Ms Ingersole was also given the opportunity to ask questions and make complaints about the process, including the opportunity to query whether other positions were available to her for redeployment.

Ventyx Pty Ltd v Mr Paul Murray [2014] FWCFB 2143

In this decision the Fair Work Commission held that it was reasonable for Ventyx Pty Ltd to give Mr Murray a day’s notice of his position being made redundant.

Mr Murray had been employed as a technical project manager for Ventyx and his role required him to move around between various projects.  From May 2013 onwards, Mr Murray was placed “on the bench”, meaning that he was between projects and not billing clients. 

During this time Ventyx reviewed its business performance.  On 12 June 2013, Ventyx approved a number of retrenchments but the identities of those individuals being made redundant were not finalised until 23 June 2013.  A large number of staff were being made redundant, and Ventyx wanted to notify all staff at the same time, with very little notice, to avoid the risk of damage to the company’s reputation and potential misuse of confidential customer data.

On 1 July 2013 Mr Murray was informed of his redundancy and told that his termination date would be the next day. Mr Murray was also invited to let Ventyx know of any mitigating circumstances as soon as possible, and the following day Mr Murray expressed interest in being redeployed to one of Ventyx’s international offices.

The Commission examined the meaning of the consultation provisions in the Professional Employees Award 2010, which applied to Mr Murray.  It held that after a “definite decision” had been made, the award required Ventyx to discuss measures to avert or mitigate the adverse effects of the decision, but not to avert or avoid that decision.  In the circumstances, the Commission considered that it was reasonable to give Mr Murray only one day in which to put forward other factors for Ventyx to consider.

Lessons for employers

Organisational restructures can be complex and stressful, and it is important to plan, implement and communicate changes effectively. 

The above cases highlight that employers should adopt the following approach when considering making a person’s position redundant:

  • Establish whether the employee is covered by an enterprise agreement or modern award.
  • Determine what your consultation obligations are, and whether the obligations begin either before or only after a decision has been made.
  • If consultation is required to occur only once a definite decision has been made, ensure the redundancy is communicated to the affected employee as soon as soon as practicable after the decision is made. Typically, this will be after the organisation’s directors or management team has approved the redundancy.
  • If consultation is required at some earlier stage, the situation is more complex, and we strongly recommend that you obtain legal advice before finalising any redundancy decisions.
  • Be wary delaying consultation with the affected employee. While there will be circumstances where a delay may be appropriate, such as where mass redundancies are to be communicated simultaneously, the necessity for the delay should be carefully considered and documented.
  • Ensure any consultation process with the affected employee is genuine. Ordinarily, it will not be necessary to hold more than a single meeting with the employee. However, the employer must explain the reasons for the decision, genuinely listen and consider the employee’s response to those reasons and the changes, and then have a genuine discussion with the employee about the employee’s redeployment      opportunities.
  • Remember, despite the above requirements, an employer is under no obligation to change its decision.